Michaela Whitbourn, Kate McClymont

A second state MP has told a corruption inquiry that property developer and now Newcastle mayor Jeff McCloy handed over a wad of cash before the last state election, in breach of laws banning political donations from property developers.

'I must admit I thought, 'Hmm, what do I do with this?',' said suspended Liberal MP Tim Owen of an envelope of cash. Photo: Phil Hearne

In an explosive day of evidence on Monday, suspended Liberal MP Tim Owen told the Independent Commission Against Corruption (ICAC) that he met Mr McCloy in Hunter Street, Newcastle before the 2011 election, where he was given a "thin envelope" stuffed with $100 bills.

Mr Owen, who won the seat of Newcastle, said Mr McCloy did not say anything as he handed over the money.

The evidence comes days after Charlestown MP Andrew Cornwell told the commission that Mr McCloy had given him an envelope containing $10,000 in cash at a clandestine meeting in Mr McCloy's Bentley.

Mr Cornwell, who has taken leave from parliament and who quit the Liberal Party on Friday, has admitted to the inquiry that he took the money from Mr McCloy and that it went into his own campaign coffers. Since 2009, it has been illegal in NSW to accept campaign donations from property developers.

In another sensational development, Mr Owen admitted that after he gave evidence in a secret hearing at the ICAC in May, he met Mr McCloy at a coffee shop in Sydney.

It is an offence to discuss evidence given in private hearings but Mr Owen claimed he was merely asking Mr McCloy if there was "anything else idiotic" he might have done in relation to Mr Owen's campaign.

After the private hearing, Mr Owen announced that he would not contest next year's election.

Mr Owen repeatedly tried to distance himself from a raft of illegalities regarding his election campaign funding. Under electoral funding laws, politicians are only guilty of a criminal offence if they were aware at the time they accepted the donation of "the facts that result in the act being unlawful".

He claimed that he was too busy campaigning, or that he relied on others, including his campaign manager Hugh Thomson, or senior Liberal and former police minister Mike Gallacher, to advise him of the legalities of various donations.

"If they believed it was legal ... then I took their word," Mr Owen said. However, earlier on Monday he admitted that he had known for years that banned donors helped to bankroll his campaign and it was "clearly not above board".

"All I can say is, I am dreadfully sorry," he said. Mr Owen claimed he "didn't actually ping to the fact that something was illegal" until a few months after election.

He said he had known since late 2010 or early 2011 that Nathan Tinkler's property development group Buildev helped to fund his campaign, and he was aware the company was a property developer. However, he insisted Mr Tinkler's company "got nothing out of me, I can tell you".

On Monday, Mr Watson foreshadowed that the commission would call federal Liberal MP Bob Baldwin, who supported Mr Tinkler's plans for a coal loader in Newcastle.The inquiry has heard Buildev made donations to Mr Baldwin, but it is not illegal for property developers to give donations to federal candidates and politicians.